...Abstract Cigarette and Tobacco taxation has been a hot topic for years. Typically, the taxing of this product is accepted as there are health concerns associated with the consumption of tobacco products. The concept of raising cigarette taxes aligns with goals of increasing revenue for local, state and federal governments, and also works to increase the overall public health of the country. Although the taxation is widely accepted, there are concerns associated with who the taxation effects primarily, how funds are being utilized and issues with meeting budget goals with the earned revenue. This paper addresses each of these topics in an effort to identify the effectiveness of cigarette and tobacco taxation. Introduction The concern associated with the health risks of tobacco use and cigarettes began as early as the 1930’s. The ill effects of tobacco were studied by epidemiologists in long term case studies to assess the increase of lung cancer mortality to smoking. The findings were considered merely casual by Surgeon General Leroy Burney in 1957. As a few years passed, the concern between the relationship of smoking and health grew. This led to The American Cancer Society, The American Heart Association , The National Tuberculosis Association and the American Public Health Association collaborating together to address a letter to President Kennedy. In this letter they asked for a call to action on the issue of cigarette smoking. The Kennedy Administration...
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...Taxation On Cigarette Smoking Economics Essay In the following paper you will be able to see who is likely to be more affected by tax increases on cigarettes: all adults or young adults. You will also be able to see how we can reduce the effects of cancer by reducing the cost of other tobacco products. You will also see long term elasticity of demand for cigarette smoking and what does this mean for the likely impact of taxes on long-term cigarette use and do you think taxing can be effective in decreasing the use of alcohol? Explain your answer using economic theory The people that are mostly affected by the increases in tax on cigarettes according to Frank J. Chaloupka would be the youth and Adults. The single most consistent finding of many econometric studies of the issue of cigarettes price being increased would lead to a drop in smoking. The ten percent increase in cigarettes price would overall drop the consumption of cigarettes sales by fiver percent. (Chaloupka, p. 3) By increasing the price in cigarettes it would most likely affect the youth and young adults do to the price increase. According to Study in 1996 by Chaloupka and Grossman they confirmed the earlier studies that the are three times as sensitive to the price increase then the adults (Chaloupka, p. 4) because they don’t have money like adults would have. Over all with the tax increase we will see a decrease in overall sales of cigarettes. To have the great effect on reducing cancer from the use of tobacco...
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...Economically and culturally smoking is considered to be a “norm” within society. The government has policies on cigarettes that try to help reduce smoking, but in an effort to make more revenue the taxes that are placed on cigarettes are not so high that consumer usage will drastically decline and affect government revenue. The government has imposed quotas and tariffs on cigarettes to help regulate the importation of them. A country like the United States has a high border tariff, which the government likes, because its economic level of exporting is high. Countries that are considered to be third-world or developing nations tend to have low or no border tariffs on tobacco. By placing a tariff on tobacco, consumers lose, but the government earns income from it in the form of taxes. Quotas on the other hand, take some of what the consumers lose and give it to the suppliers who are fortunate enough to have their product shipped as part of the quota. For example, the few tobacco farmers in the United States who are granted quotas by the government earn a lot of money mainly because they have no shipping cost – government pays for their shipping cost. The government knows that cigarettes are a bad commodity but since the government makes money off of it, taxes are put in place. The taxes are not only put in place for the government to make money but an effort to reduce smoking, particularly amongst young people (MBN, 9). Young people are targeted the most because studies have...
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...THE ECONOMICS OF TOBACCO TAXATION IN INDIA Tobacco taxation in India tends to be low for the most commonly consumed tobacco products. In order to suggest ITC about their strategy for the rural market, we must understand the taxation policies that prevail. India has a tobacco tax structure which is complex, different taxes for hand-rolled versus machine-made bidis, etcetera. In the table given, we observe that bidis are taxed less than filtered cigarettes. At the same time, the tax remains constant for bidis whereas it increases for cigarettes. In table 3.5, we observe that cheaper the tobacco, higher the tax because we assume that cheaper tobacco is more hazardous. But for bidis though the cost is cheap, it is taxed less as it focuses on the mass consumer whose buying potential is less. So its demand is more elastic than the expensive tobacco. Considering the data given in table in 3.1 and 3.5, tobacco products like bidis are less taxed, and it caters to the needs of majority of the consumers. Cigarettes and bidis are consumed by classes of people from different economic strata. Rural markets have a potential for bidis since the lower income group resides more in rural areas. The taxation on bidis is almost constant through the years, it is more profitable to enter the tobacco market through bidis in rural areas.. Own price elasticity in rural areas for bidis is more elastic than in urban areas. For example, an increase of 10% in price will decrease the quantity...
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...income spent by a person on purchasing the product. The inelastic demand curve is as follows: (Economics13 n.d.) In case of cigarettes, the price elasticity measured for different countries by WHO in their study was less than -1 or inelastic and the addictive nature of cigarettes being cited as the main reason for it. The study however does point out that if the prices are increased for a longer period, the demand might in fact be elastic as people would be impacted more by the increase in prices. The research further suggested that the demand elasticity varies amongst poor and rich countries along with the population demographics. (Perucic, 2012) In general when the prices are increased or taxes are raised on inelastic products, the beneficiary is often the producer or the government as the tax burden would be on the consumers. A tax on cigarettes would mean the consumers bearing a greater tax incidence which would in fact discourage them to spend more on tobacco products. (Tax-inelastic-demand n.d.) As seen in the graph above, a tax imposition on cigarettes would shift the supply curve on the left with the equilibrium quantity reducing from Q to Q 1. The inelastic demand would mean that the tax burden is borne by the consumers whereas the producers bear a small fraction of the tax applied. The government while increasing taxes on cigarettes needs to ensure that all relevant substitutes for the...
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...Abstract: “Raising taxes is one of our strongest weapons to fight out tobacco,” said Arun Thapa, Acting WHO Representative to India. Hiking tobacco taxes by 320% between 1996 and 2013 helped the US reduce its per capita annual consumption of cigarettes from 1820 to 893 cigarettes, and cut the number of adults who smoke by about a third. In India, central-excise duty has increased 1606% on the shortest non-filter cigarettes available and 198% on the shortest filter cigarettes since 1996. Taxes constitute about 60% of the price of a best-selling pack of 20 cigarettes, against about 43% in the US. But India was not able to reduce its capita annual consumption of cigarettes in the same proportion. Cigarette smokers in India increased from 25 million to 46.4 million over 14 years (1996 to 2010), and per capita annual consumption of cigarettes declined marginally, from 101 to 96 cigarettes over the same period. With some assumptions, it can be shown that the tax on bidis can be increased to Rs. 100 per 1000 sticks compared with the current Rs. 14 and the tax on an average cigarette can be increased to Rs. 3.5 per stick without any fear of losing revenue. The government though has been taking rigorous initiatives to try and reduce the consumption of tobacco products it has not been able to achieve the results which it wanted to have. There have been many reasons for this to happen and we will look into it in this report. Introduction:- In India, tobacco consumption...
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...Cigarette tax measure may have unintended consequences | | | | Matt Evans On the surface, this November's Ballot Measure 44 is simplicity itself. The measure will increase taxes on cigarettes by 30 cents per pack, as well as on other tobacco products, and the revenue raised will be dedicated to the Oregon Health Plan and tobacco use reduction programs. What could be more straightforward? However, the measure raises a host of interesting issues that voters should weigh prior to casting their votes. Most important, of course, is the core of the measure, its purpose: to raise money for the Oregon Health Plan, ostensibly to offset costs the plan incurs from smoking-related illnesses. State revenue estimators understand that anytime you raise the tax on something, you will get less of it. This is certainly true in the case of Ballot Measure 44 and its effect on cigarette smoking. In fact, the State Legislative Revenue Office estimates that cigarette use will decline about 4.5 percent due to the increased taxation. In a series of four steps over the past 17 years, Oregon has raised the tax on cigarettes from 9 cents per pack to the current 38 cents. Each of these tax increases represented a smaller amount per pack than Measure 44's 30 cents. In every instance, tobacco use has fallen by more than the current projection of 4.5 percent. In fact, tobacco use fell an average of almost 9 percent--twice the state's estimate--after those four cigarette tax increases. The...
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...Should Electronic Cigarettes Be Regulated As Traditional Cigarettes? Recently, there has been a national discourse concerning the extent to which the government should meddle in the regulation and taxation of electronic cigarettes, or e-cigarettes. Some states are in favor of taxation on these products, but others are not. Anti-smoking advocates push for more restrictions and higher taxes for the product, but many others disagree, arguing that e-cigarettes are a healthy alternative to traditional cigarettes. As of right now, the Food and Drug Administration has no regulative control over e-cigarettes because they are currently not considered to be medical products. E-cigarettes are battery-powered substitutes which heat up liquid nicotine into a vapor. As such, they do not contain any of the additional hundreds of cancer-causing chemicals or tar that you would get from smoking tobacco-based cigarettes. The current marketing of the product is to attract current smokers to the product, rather than serve as a medical smoking cessation aide, which would have been under regulatory authority of the FDA. Because of this, they are considered to tobacco products, under the regulatory authority of the bureau of alcohol, firearms, and tobacco. However, as a newer product, they are not itemized on current tobacco-related laws, & don’t contain actual tobacco plant, therefore letting them escape the many penalties imposed on such products. We do not believe that it would make...
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...The Truth about the Economy of Cigarettes Christopher Tucker Central Penn College “The Truth about the Economy of Cigarettes” The topic of the production, manufacturing, taxation, advertising, and laws of the tobacco industry in the United States has always been, and will always remain, one of the most controversial industries in the United States of America. It is an industry where spokespeople from both sides have blatantly lied to the American public in order to further achieve their goals and agendas. Unlike our grandparents and great grandparents, we all know that cigarettes are extremely detrimental to one’s health. Though a Surgeon General warning is displayed on each pack of cigarettes, stating that; smoking causes lung cancer, heart disease, emphysema, and may complicate pregnancy. There are so many chemicals in a single cigarette, that it is one of the few products on the market that does not display it’s ingredients on the packaging. After viewing the amount of chemicals in cigarettes, I don’t believe they would even be able to fit them on the box if they tried There are two sides to every agenda. There is always some bad with any good. There are always faults where there is success. Yes, cigarettes are extremely unhealthy for the American public, but it is one of the few remaining markets of production that the United States ranks as one of the top producers in the entire world. It is “Tobacco Season” in our area of Lancaster, Pennsylvania. If you were to...
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...Should Cigarette Smoking be Made Illegal? Name Institution Date A cigarette is a small cylinder like filled with cut tobacco leaves and rolled in a paper and ignited for smoking. In most countries, tobacco smoking is legal due to the businesses motives and also the people who are addicted. They cannot do without it. It has immense consequences, and it should, therefore, be illegal from the effects to the smokers, passive smokers and all the human beings due to the pollution of the environment. The following are some of the consequences from smoking tobacco: Smoking tobacco has no healthy benefit due to the diseases it brings to the smoker. The continued smoking leads to high risk of lung cancer, heart attacks, blood clots, browning of teeth and makes the breath and clothes to stink. These diseases especially the lung cancer has led to so many deaths of the cigarettes smokers and hence the making of the smoking illegal should greatly help in the decrease of these deaths. The smokers also cause these effects to the non-smokers (passive smokers) and they become victims of the same diseases especially to close members of the family and the pregnant women to the unborn where they are born unhealthy hence the cigarette smoking should be made illegal (Nelson,2012). Tobacco smoking leads to heavy tolerance and dependence to it and hence becomes addicted due to the nicotine in it. This makes the users have craved for it and difficult to stop using it. People who have psychological...
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...Abstract This paper is a cumulation of a three part portfolio assignment describing the tobacco tax issue in the United States. The first part of the paper defines the tax issue and gives a brief history of the tobacco excise tax. The second section discusses the stakeholders and an analysis of the issue. And lastly, I describe my policy perspective. The Tobacco Tax Issue Is taxation on tobacco an effective means of decreasing the smoking rate or is it just an elaborate ploy to increase taxes by playing on voter emotions? The message is clear and has been etched in our minds over the years; tobacco kills. Tobacco and secondary tobacco products kill an estimated 440,000 Americans per year. Over the past several decades, state and local governments have passed tobacco excise taxes and other laws regulating the use of tobacco. But who is actually behind the legislature? First Tobacco Tax Tax on tobacco was first implemented by Alexander Hamilton, secretary of the treasury, in 1794 (Altman, 2009). The tax was soon repealed, but excise taxes have been a staple in federal revenues since the American Civil War. In 1921, Iowa successfully passed the first state tax on tobacco, with many states to follow. Not only does the federal government and state governments tax tobacco, but now city municipalities are also imposing a local tax on tobacco (Altman, 2009). But what is the current tobacco tax about? There are several sides to...
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...policy. PMI must balance strategies which address the heightening involvement of western governments in the tobacco industry with the growth opportunities in developing markets. The following outlines the three most significant risks facing PMI and identifies existing strategies in comparison to competitors. The first significant risk facing PMI is government restrictions on advertising. Governments globally are increasingly restricting the means by which PMI can actively market to consumers. As a result, the branded tobacco industry has been limited to select sponsorship and online marketing efforts. The latest restriction involves mandating plain packaging. Australia is set to become the first country to introduce plain packaging for cigarettes in December 2012, thereby eliminating a critical brand marketing vehicle for the industry, a precedent that will have worldwide repercussions. Such measures are anticipated to expand to other regions, which restrict PMI’s ability to launch new (and differentiated) brands and to command a premium price. In the event that the tobacco product industry becomes a commodity market, with no way to differentiate other than price, production cost-reduction initiatives will serve to partially mitigate against the risk to profitability. In response to advertising restrictions, the industry has moved to new promotions using largely unregulated online advertising to establish new customers and maintain existing ones. For example, PMI has launched Marlboro's...
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...Brandt's The Cigarette Century reminded me of Prof. Colgrove's focus on advertising and soliciting of credible sources to endorse a product in the lectures last week on heart disease and risk factors and the pharmaceutical boom. The rhetoric surrounding cigarettes as a "healthy alternative" to eating fattening sweets to a current reader seems ridiculous given the widely known and accepted negative health consequences of smoking. Bernays, Freud's nephew and an advertiser, solicited expertise to promote cigarettes, such as the words of Physician Clarence Lieb who criticized the American trend of overeating. The aggressive marketing tactics used to recruit new smokers from all different demographics bring up serious questions regarding what kind...
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...before the Europeans came from England, Spain, France, and Italy to North America. Native American smoke tobacco though a pipe for special religious and medical purposes. They did not smoke every day. Tobacco was the first crop grown for money in North America. In 1612 the sellers of the first American colony in Jamestown, Virginia grew tobacco as a cash crop. By the 1800s, many people have begun use in small amounts of tobacco. Some chewed it. Others smoked it occasionally and a pipe or they hand rolled cigarette or cigar. On the average, people smoked about 40 cigarettes a year. The first commercial cigarettes were made in 1865 by Washington Duke on his 300-acre farm in Raleigh, North Carolina. The American tobacco Company was the largest and most powerful tobacco company until the early 1900s. In 1902 Phillip Morris Company came out with its marble brand. They were selling cigarettes mainly to men. Everything changed World War...
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...Many countries have recently imposed a ban on smoking in public areas, including restaurants and bars. Discuss whether an outright ban is necessarily superior to either a Pigovian or Coasian solution to the externalities created by smoking in public places. Introduction Partial smoking bans have become increasingly popular in Western democracies in recent years and tend to revolve around the banning of smoking in public areas. This essay will explore economic arguments and solutions relating to the externalities caused by smoking. The central problem at the heart of this issue is the over-consumption of cigarettes and the problem that the externalities of smoking cause for the general public and therefore this essay will show that efforts to curb total level of cigarette consumption can be approached from a variety of different perspective (see graph below). The essay will begin by discussing the economics of externalities before moving on to examine Pigovian and Coasian theoretical frameworks. The final section of the essay will apply these frameworks and will show that on balance a Pigovian tax in conjunction with a partial ban is the socially optimum solution. For the purposes of this essay an outright ban will refer to a total ban of cigarette consumption in society. [pic] Fig. 1 – Negative Consumption Externalities (Tutor2u, 2013). The economics of externalities The notion of externalities is not straightforward to define and Vanhove argues that externalities is...
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